What powers does the Supreme Court hold regarding curative petitions, what is the intended scope of such petitions, and what are the practical implications of the Supreme Court’s intervention?
Minimum judicial interference is the guiding principle of the Arbitration & Conciliation Act, 1996 and has steered the judgments of the Supreme Court for the last decade. Recently, though, the Supreme Court has through curative petitions intervened in two commercial arbitration matters. The first – to determine a question of law and then to undo an award it considered patently illegal. While the former was well received by the legal community, the latter has been met with criticism.
Consistency, certainty and finality are the cornerstones of a sophisticated and successful judicial system, especially one that seeks to foster arbitration. Businesses are attracted to arbitration since it promises swift and efficient dispute resolution, a promise that is ultimately reliant on limited yet predictable and consistent judicial intervention to uphold the integrity of arbitration and enforceability of awards while holding parties accountable for their commercial decisions.
Minimal judicial intervention except appeals to the Supreme Court
The Arbitration and Conciliation Act, 1996 (Act) recognises these principles and minimises judicial interference[1] except as provided for in the Act. Briefly, these interventions include the reference to arbitration, granting of interim reliefs (that too in cases where a tribunal is constituted, only when the tribunal cannot grant efficacious reliefs), assistance in evidence, extension of timelines, appeals only from limited orders and a challenge to the award on limited grounds.[2]
The Act also limits second appeals, but the right to appeal to the Supreme Court is the only exception which cannot be taken away[3]. The right to appeal to the Supreme Court may either be conferred by statute or when a High Court so certifies. However, under Article 136 of the Constitution of India, 1950 (Constitution) the Supreme Court has the discretion to grant special leave to appeal from any determination passed by a court or tribunal in India in any cause[4].
The Curative Petition – a judicial innovation
Article 142 of the Constitution also confers on the Supreme Court an inherent all-encompassing power to pass any order to do complete justice in any matter pending before it. In exercise of this power, the Supreme Court in Rupa Ashok Hurra v Ashok Hurra[5] (Rupa Hurra) held that in the rarest of rare cases, the principle of finality may give way to the duty of rendering justice by a ‘curative petition’ even when all remedies have been exhausted.
The Supreme Court, recognising that this may open the floodgates to litigation and that it was impossible to enumerate all circumstances where such power could be exercised, also laid down broad circumstances for the exercise of curative petitions, namely where:
- Principles of natural justice have been violated.
- The judge has not disclosed his connection with the subject matter and, or the parties to the dispute thereby leading to an apprehension of bias. The court has acted wholly without jurisdiction.
- There has been an abuse of the Court’s process.
- There has been a gross miscarriage of justice.
The Supreme Court has also laid down procedural conditions that must be satisfied before a curative petition can be filed.
Supreme Court’s interventions in commercial disputes
Subsequently, curative petitions have been entertained in matters of significant public and, or constitutional interest with a view to prevent gross miscarriage of justice. More recently, the Supreme Court resorted to this extraordinary remedy in cases of commercial interest.
In Re. Interplay between Arbitration Agreements under the Arbitration & Conciliation Act, 1995 and the Indian Stamp Act, 1899[6] (Re: Interplay) seven judges of the Supreme Court were asked whether an arbitration agreement would be invalid if the underlying contract is unstamped or inadequately stamped. Notably, the question had been decided in the affirmative in NN Global Mercantile (P) Ltd. v. Indo Unique Flame Ltd.[7] (NN Global 2) by a constitution bench after much litigation. Yet, notice was issued in Seka Dobric v. SA Eonsoftech Private Ltd.[8] (Seka Dobric) by a three-judge bench in an application for appointment of arbitrators under the Act. Similarly, in Dharmaratnakara Rai Bahadur Arcot Narainswamy Mudaliar Chattram v. Bhaskar Raju and Brothers[9] (Bhaskar Raju) (which was dismissed in light of the law prevailing at the time) a curative petition was filed before a five-judge bench. A notice was issued after the Court’s judgement in NN Global 2. Both Seka Dobric and were referred by the Supreme Court to a seven-judge bench to determine the question of law. Bhaskar Raju
Interestingly, in Re: Interplay, the question of whether the curative petition in Bhaskar Raju met the tests laid down in Rupa Hurra was raised before the Court. The Court observed that the Supreme Court Rules, 2013 (SC Rules) permitted any bench in any proceeding including curative petitions to refer matters to a larger bench. The Supreme Court also ruled that, as the Seka Dobric case was a pending proceeding, it presented a live issue to be resolved. More importantly, the Court relying on Central Board of Dawoodi Bohra Community v. State of Maharashtra[10] held that although ordinarily a larger bench of the Supreme Court’s views are binding on a bench of lesser or coequal strength, there are two exceptions. That is, the Chief Justice’s discretion to frame the roster and where a matter has come up before a larger bench who is of the view that the decision of a bench with lesser quorum needs correction. Noting that the exceptions must be exercised cautiously and in situations which had large ramifications, the Court in Re: Interplay opined that the question of law was pivotal and impacted business and commerce in India. The court proceeded to hold that the arbitration agreement would not be invalid if the underlying contract is unstamped or inadequately stamped.
The Supreme Court’s decision in Re: Interplay was welcomed by both the business and legal community for its commercial significance, as it resolved a critical issue that might have otherwise brought arbitrations to a standstill. “However, the decision remains open to debate as to whether the Court acted within its jurisdiction to rule on the reference.
More recently, the Supreme Court allowed a curative petition in Delhi Metro Rail Corporation Ltd. v Delhi Airport Metro Express Pvt. Ltd.,[11] (DMRC Case). Briefly, the facts in the DMRC Case are:
- An award was made against the Delhi Metro Rail Corporation (DMRC) under a concessionaire agreement (Agreement) under which Delhi Airport Metro Express Pvt. Ltd. (DAMEPL) had exclusive rights to implement, manage and operate the Delhi Airport Metro project.
- Pursuant to delays and defects raised by DAMEPL, a joint inspection committee was set up which ultimately resulted in a joint application to the Commissioner of Metro Railway Safety (CMRS). The CMRS sanctioned the metro but provided for conditions including speed restrictions.
- Meanwhile, DAMEPL issued a notice alleging that the defects caused a material adverse effect on the performance of DAMEPL’s obligations and sought that the defects be cured within 90 days, as stipulated in the Agreement. Thereafter, DAMEPL issued a termination notice pursuant to which DMRC initiated arbitration. The dispute between the parties arose out of the Agreement and the arbitral tribunal comprised of three engineers as stipulated in the Agreement.
- The arbitral tribunal held unanimously in favour of DAMEPL. The sanction by the CMRS was an issue framed in the arbitration.
- DMRC challenged the award under Section 34 of Act. This challenge was unsuccessful. Pertinently, the Single Judge ruled that the arbitral tribunal had taken a plausible view as laid down in Associate Builders v. DDA[12] (Associate Builders).
- An appeal was then preferred under Section 37 of the Act. In appeal, a division bench of the Delhi High Court (Division Bench) partially set aside the award on the ground of patent illegality.
- DAMEPL challenged the Division Bench’s judgement under Article 136 of the Constitution. This challenge was successful, and the Supreme Court restored the award.
- A review petition was filed against this order which was also dismissed. DMRC then preferred a curative petition before the Supreme Court.
The Supreme Court allowed the curative petition; after analysing the evidence and the contract it concluded that the award suffered from patent illegality since (i) the award overlooked vital evidence and material on the record; and (ii) the interpretation of the contractual terms was unreasonable.
Is the Supreme Court justified in the DMRC Case?
Under the Act, an award can only be challenged on limited grounds, which are the following: (i) incapacity of the party, (ii) invalidity of the arbitration agreement; (iii) improper notice to the party or circumstances where a party is unable to present its case; (iv) the arbitral award being ultra vires the scope of the arbitration agreement and, or, of the terms of reference; (v) if the subject matter of the dispute is not arbitrable (v) composition of the tribunal is inconsistent with the terms; and (vi) if the arbitral award is violative of public policy.
The Supreme Court considered the ground of public policy in ONGC Ltd. v. Saw Pipes, where it held that this ground extends to awards that are contrary to substantive provisions of law, the Arbitration Act, or the terms of the contract. This position was further clarified in Associate Builders, where the Court stated that an award would be patently illegal only if the breach of substantive provisions of law strikes at the very root of the matter. Additionally, the Court reiterated that while interpreting matters of contract, an arbitrator’s interpretation of contractual provisions cannot be interfered with unless it is so unreasonable that no fair-minded or reasonable person would adopt it. The Supreme Court has consistently maintained that as long as the arbitrator’s approach is neither arbitrary nor capricious, a court hearing a challenge to an award cannot reappreciate evidence or interfere with the arbitrator’s decision in any manner.
In the DMRC Case, whether the award was patently illegal was considered on four occasions – once by the Single Judge, then Division Bench and then the Supreme Court under special leave to appeal as well as in review. In other similar cases before it where an award was impugned on the ground of patent illegality, the Supreme Court rejected curative petitions.[13]Why then did the Supreme Court interfere in the DMRC Case? What made it an exception? The decision of the Supreme Court lends some answers as it opines “… [the Supreme Court] restored a patently illegal award which saddled a public utility with an exorbitant liability. This has caused a grave miscarriage of justice, which warrants the exercise of power under Article 142 in a Curative petition, in terms of Rupa Hurra…”.
The Supreme Court’s rationale is disconcerting and places state instrumentalities on a higher pedestal than other litigants, providing a sovereign immunity which is otherwise not envisaged at law; more so in the context of public – private partnerships. It is also a stark departure from the trend of minimis ing judicial interference in the arbitral process and may open a new avenue for recalcitrant parties to get one more bite at the cherry.
The Supreme Court has not laid down any guidelines or parameters to guide the Court’s discretion in exercising this extraordinary jurisdiction. In the DMRC Case, the Supreme Court’s analysis was only a repetition of what had already been analysed by both the Delhi High Court and the Supreme Court – ostensibly all rationale judges and persons.
The decision also has significant ramifications from a practical perspective. Between 2020 and 2025, the Government of India plans to invest USD 1.6 Trillion in public infrastructure projects with a focus on energy, roads and railway projects.[14] Several of these projects are by public-private partnerships[15]. State instrumentalities have large resources but are often bureaucratic and litigious. Permitting curative petitions merely because a state entity that consented to arbitration is saddled with debt cannot be sufficient cause.
If such petitions are permitted, it will inevitably lead to an increase in the costs of business in India and adversely affect the Ease of Doing Business rankings. It may also result in the lower judiciary to reconsider decisions against the state in the fear that if it rules against the state entity; its decision may be overturned. Such developments are unlikely to inspire confidence in parties to designate India as the seat of arbitration.
In short, the DMRC Case has the potential to open Pandora’s box. It would therefore be prudent for the Government to take legislative action to ensure that the Act’s mandate of minimal judicial interference is implemented. Meanwhile, the Supreme Court must constrain themselves to the parameters laid down in Rupa Ashok Hurra and not permit curative petitions in matters merely because the State faces a heavy financial burden.
